The giant awakens: Print 21 magazine article

Once regarded as the ugly duckling of the industry, PMP Limited, the region's biggest commercial printing company, has emerged re-equipped, revitalised and ready to seek out new opportunities. Two and a half years into his role as CEO, Brian Evans spoke to Simon Enticknap about the remarkable transformation.

It's been a good news day for Brian Evans, PMP Limited CEO. As he sits down to talk about the rejuvenated fortunes of the region's largest commercial printing company, new research released by one of the company's divisions, Pacific Micromarketing, has made it onto the front page of Sydney's Daily Telegraph, giving the company the sort of positive exposure that money can't buy. It positions PMP as a company in touch with the market, attuned with what's going on out there, and a knowledgeable source of information for advertisers and marketers - in other words, PMP's client base.

Good headlines are like gold dust for a company like PMP which has experienced more than its fair share of horror stories in the past, but in truth, these days there are many more good days than bad ones for the company. Recent half-yearly results saw overall revenues rise by 5.6 percent over the year to $702 million and the board felt confident enough in its on-going performance to reaffirm that projected earnings for the full year were on target. Last year, the publicly-listed company paid its first dividend in the seven years, not a big one, it's true, but important symbolically as a reward for the faith shown by patient investors and as a sign of improving financial health. Although upbeat, Brian Evans is not getting too carried away just yet.

"We're really about where we thought we'd be," he says, reflecting on the latest results. "We won a tax case that was very good for us [a settlement worth $43 million], we've got our borrowing at the lowest it's been for a long, long time and the balance sheet is in great shape. People are starting to realise that PMP is generating a lot of cash every year."

In fact, the cash flow is now so strong that Evans says that it's not unreasonable to expect PMP's debt burden (currently standing at over $200 million) to be erased over the next couple of years, well ahead of schedule. The prospect of a cashed-up, debt-free PMP is one which is sure to make more than a few people sit up and take notice. Almost without us noticing, the once ugly duckling of the printing industry has become a swan.

Keep on moving
In many ways, the old PMP was symptomatic of what was wrong with the industry as a whole – crippled by debt, shackled to old technology and burdened by out-moded work practices. True, the company managed to keep its status as the region's biggest printer but, for a long time, it looked more like a candidate for The Biggest Loser than a lean, mean printing machine. Those days are over and the transformation is almost complete. New technology, in particular a flotilla of new and late-model heatset presses, long-term contracts with publishers and retailers, and a concerted effort to reform the workplace culture have had a slow but steady impact on the bottom line.

While the rebuilding process was begun under his predecessor, David Kirk (now CEO at Fairfax Media), it is Brian Evans and his management team (many of whom, like Evans, came from Fairfax) who have seen the task through to the end and who deservedly get the kudos. Not that there ever is really an end to rebuilding; if there is one lesson to be learnt from past events it is that companies like PMP must be constantly evolving and that the market is always changing ever-more rapidly.

"Because the market is moving so fast, you've got to be constantly moving just to keep pace with it," says Evans. "Just to start with, you've got to be able to grow your revenues and find new revenues. Some businesses will go off the boil a bit and some will grow faster, and that's really what it's all about.

"Everything goes in cycles. When I came along two and a half years ago, the market had changed dramatically. PMP had taken a lot of smaller businesses out of the market, established key production facilities in every state and New Zealand and put quite a lot more volume into the marketplace, as did our competitors. Suddenly we're no longer talking about quite a lucrative spot market but a very competitive market with too much capacity. From that perspective, I looked at the business differently and decided that, as the largest printer in the region with the biggest presses, we needed volume."

That meant focusing on servicing customers with long term contracts to ensure that the ever-hungry presses – whose appetites are measured not in terms of pages or sheets but rather tonnes – are kept well-fed. The longest contract today is for ten years with Pacific Magazines while more typically they are for between one and three years, which may not sound very long but, as we all know, a lot can happen in the industry in that time.

A year to remember
The past couple of years have certainly been eventful ones for Evans, even without the on-going task of producing over three billion catalogues, 26 million books, 30 million directories and 155 magazine titles each year. At the height of the private equity buying spree that hit the industry, PMP was itself courted and discussions were held which eventually led nowhere – a fortuitous outcome perhaps given the current crisis in debt markets.

"The board and myself weren't overly excited by private equity, mainly because we had a very strong view on what we could do with the business," says Evans, adding that it was felt that shareholders should benefit from the hard work being done, rather than private equity. Since then, of course, share prices have fallen across the board although Evans believes the PMP price has been holding up well compared to other companies.

That was followed in August last year by the decision of the ACCC to block the proposed merger between PMP's book printing division, Griffin Press, and Victorian-based McPherson's Printing, a ruling which Evans admits was "surprising" and one which he believes is bad for the booking printing sector as a whole.

"We think we're very well positioned with books, particularly now with digital printing which we're up-grading dramatically – it's a good little business. The problem will be is that it could become a sunset business and decisions like the ACCC's will actually push it more so that way."

Somewhat ironically the saviour could come in the form of China and PMP's ability to print some books there in order to balance what is printed at home and thereby offer the best of both worlds to publishers. The fact of this happening has become much more likely as a result of the acquisition of Times Printers late last year, an investment which is now starting to look like the deal of the year. PMP had previously foreshadowed spending $100 million to refurbish its Melbourne plant to the same standard as Moorebank in Sydney, but for $80 million (of which it paid only $15 million in cash, the rest in shares) it has been able to relocate modern Goss presses from Times Printers to Sydney, Brisbane and Melbourne as well as inserting lines to Perth to complete its refurbishment programme at a fraction of the cost and time required to install new equipment.

On top of that, the company picked up some new business from Times Printers, sold off some unwanted assets, removed a competitor from the market and acquired a strategic partner in Asia in the form of the Times Publishing of Singapore which now holds a 11.5 percent stake in PMP and has a seat on the board. Evans makes no secret of the fact that he sees this as a great opportunity for the company to work with the Times group in Asia where it complements many of PMP's activities.

"There's definitely an opportunity in books, high-end magazines, possibly purchasing and also the distribution area," he says. "There are synergies across the group and now that they are a major shareholder they're delighted to talk that way too."

He believes that local printers have little real idea as to the amount of work which is being done in Asia, highlighting a visit he made to the Times plant in Singapore recently where every job being done had originated from Australia and work from NSW alone totalled 22,000 tonnes.

"The problem for Australians is that we tend to think that the market is only this big when actually it's much bigger. We can't underestimate what's going on out there and I think we should be playing in that space," he adds.

Not reliant on mags
Evans professes to be unperturbed by rumours of new heatset operations being set up by publishers such as ACP, pointing out that that's exactly what they are – rumours – and that, anyway, such markets have always been cyclical (recent figures suggest magazine circulations are on the wane somewhat) and as one declines, it is often compensated by another filling the void. Catalogue production, for instance, continues to grow by a healthy 6-8 percent per annum or about 20,000 extra tonnes per year. Likewise, he sees any further moves by Fairfax Media into the heatset space as catering primarily for a different commercial market.

Besides, by accident or design, the new PMP is now a much more successfully diversified media company, combining massive print operations with its distribution businesses (magazine and catalogue), data management, marketing, pre-media and digital operations, all contributing towards the greater whole. It is, in many ways, the model for a contemporary printing business - diversified, customer-focused and flexible, even for a giant.

"Every business today is looking for ways in which they can save money, put their prices up, bring their cost base down, so you've got work in that environment," says Evans. "So for PMP, like any company today, we've got to be nimble, we've got to be able to move quickly and offer our customers what they want. From that perspective, we think we've done a very good job. Our service to our customers is excellent."

Looking to buy
So exactly how big can a local commercial printer grow? Evans says that although the ACCC approved the takeover of Times Printers, there is a limit as to how far it would allow a single company to dominate the web heatset market. Besides, it wouldn't necessarily be a good commercial move; these days, as soon as a company grows too dominant in a market, customers instinctively start to look for alternatives.

Sheetfed is a different matter. Evans says he admires the hard work undertaken by the likes of Blue Star and Geon in pulling together different operations and describes the commercial sheetfed market as "really, really hard". PMP exited that sector when it sold its sheetfed operations to Promentum before that company was absorbed into Geon, but now Evans says that if the right opportunity came along in the sheetfed sector then PMP would definitely look at it, regardless of who it might be.

"We're quite happy to be out of the sheetfed business but then again, if one of those businesses was to become available at a very reasonable price we'd look at it seriously, mainly because I do think a lot of the pain has already been gone through."

It's a tantalising thought, the region's largest printer gobbling up one of the big sheetfed producers to create a combined operation that, in Evans's own words, would occupy "a powerful position".

Two and a half years into a four year contract (one which looks like being extended), Evans is now in the position of being able to look beyond mere survival and consolidation to cast a wider net in the print market and beyond.

"From our perspective, we are cautious about acquisitions, but we are on the look-out for businesses that are aligned with the print business and our distribution business, and aligned with our research company and all those businesses that we're in today. We think there is a real opportunity to grow some of the smaller businesses we have and to grow in those sectors.

"There are a lot of areas we can get into that we haven't been in before."

The giant has risen from its slumbers. And it's hungry.